From the problem below, I need to figure out how you get $10,000 for FA old van in year six. Project Cash Flows Your company is contemplating replacing their current fleet of delivery vehicls with Nissan NV vans. You will be replacing 5 fully-depreciated vans, which you think you can sell for $3,000 apiece and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 34 percent tax rate, what will the cash flows for this project be?

YEAR 0 1 2 3 4 5 6

Net incremental sales $0 $0 $0 $0 $0 $0

Less: Net incremental variabe costs -3,700 -3,700 -3,700 -3,700 -3,700 -3,700

Depreciation on new vans(149,250) $29,850 $47,760 $28,656 $17,194 $17,194 $8,597

Forgone depreciation on old vans 0 0 0 0 0 0

Less: Incremental Depreciation 0 29,850 47,760 28,656 $17,194 $17,194 8,597

EBIT (Net variable costs - increm depr) $0 ($26,150) ($44,060) ($24,956) ($13,494) ($13,494) ($4,897)

Less: Taxes (EBIT * .34 tax rate) 0 -$8,891 -$14,980 -$8,485 -$4,588 -$4,588 -$1,665

"Net Income" $0 ($17,259) ($29,080) ($16,471) ($8,906) ($8,906) ($3,232)

Plus Depirciation 0 $29,850 $47,760 28,656 $17,194 $17,194 8,597

OCF $0 $12,591 $18,680 $12,185 $8,288 $8,288 $5,365

FA for new van $149,250 $0

FA for old van -$9,900 $10,000 FA $139,350 $0 $0 $0 $0 $0 $10,000

NWC 0 0 0 0 0 0 0

Less:Investment in operating capital 139,350 0 0 0 0 0 0

FCF = OCF - IOC ($139,350) $12,591 $18,680 $12,185 $8,288 $8,288 ($4,635)